Gold settles lower for a second-straight session

Greek deal, upbeat U.S. data, stronger dollar pressures prices

SarahTurner

SAN FRANCISCO (MarketWatch) — Gold futures settled lower Tuesday, for a second session in a row, pressured by a debt deal on Greece, a stronger dollar and generally upbeat U.S. economic data.

Gold for December delivery
US:GCZ2
fell $7.30, or 0.4%, to settle at $1,742.30 an ounce on the Comex division of the New York Mercantile Exchange. Prices slipped by a modest 0.1% on Monday.

December silver futures
US:SIZ2
also shed 16 cents, or 0.5%, to end at $33.98 an ounce.

A meeting to discuss Greece’s finances wrapped up early Tuesday with Greece’s institutional lenders reaching a deal to pave the way for Athens to receive almost 44 billion euros (almost $57 billion) of financial aid, while bringing its debt down to a sustainable level. The deal is expected to trigger another aid payment for the debt-struck country.

Fiscal cliff talks stuck in low gear

(5:15)

Leaders tackling the fiscal cliff return to Washington Monday with the eyes of the world on them and seemingly only one point settled: that they've all pledged to try for an agreement.

The dollar has strengthened, “with the euro coming off a bit since the Greek debt deal was announced,” said Ben Traynor, chief economist at BullionVault.

The ICE dollar index
DXY, -0.30%
climbed to 80.411 from 80.227 late Monday in North American trading. Strength in the greenback weighs on prices for dollar-denominated commodities such as gold.

There are “a lot of ifs and maybes in the statement put out by the eurogroup,” Traynor said. And “in the end, we got a bit of everything, though much of it is on a conditional basis.” See: Euro zone, IMF agree on Greece debt deal.

So, “the market seems unconvinced by the Greek deal,” said Traynor.

Currency pull

For now, HSBC analysts said that gold’s path is likely to show sensitivity to moves for the euro against the U.S. dollar, and they had expected the euro to advance modestly if lenders agreed over financial-aid disbursement to Greece.

The euro
EURUSD, +0.4665%
rose to as high as $1.3007 against the greenback on Tuesday. It traded at $1.2961 ahead of the announcement of the initial deal on Greek aid, but was last at $1.2928, down from $1.2961 Monday.

Barring sharp currency moves or unexpected economic developments, the HSBC analysts expected this week’s contract expirations would exert the greatest near-term influence on gold. The front-month November gold contract
US:GCX2
expires at the close on Wednesday, though much of the trading volume had moved to the December contract long ago.

“With much trading activity gravitating around the $1,750 an ounce level, we anticipate the expiration will be modestly price-positive for gold. Beyond that, we believe gold and silver prices will tend toward consolidation, as investors await further developments on the U.S. fiscal-cliff negotiations,” the analysts said.

The fiscal cliff refers to more than $600 billion of automatic U.S. tax hikes and spending cuts due to occur in January unless circumvented beforehand.

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